EUR/USD Daily Forecast: ECB Easing Speculation Limits Gains Below $1.11120

The EUR/USD pair is trading near $1.1070 in the European session as the US Dollar weakens following the release of the US ISM Manufacturing PMI data for August.

The PMI came in at 47.2, below expectations but still an improvement from July’s 46.8, signaling continued contraction in the manufacturing sector.

📊PMI Survey Raises Concerns Over Weak NFP Report

The S&P Global PMI preliminary index showed the job market slowed in August. On the other hand, the ISM manufacturing PMI’s employment sub-index for August, while rising slightly, remained below the 50 level that separates growth… pic.twitter.com/Rh6XaXsfEJ

— FXFC (@FX_FGang) September 5, 2024

Investors are now looking ahead to Friday’s US Nonfarm Payrolls (NFP) data, which could significantly impact the Federal Reserve’s rate decision.

The NFP report and the JOLTS Job Openings data are expected to provide crucial insights into the labor market, further influencing the USD.

• ISM Manufacturing PMI: 47.2 (Expected: 47.5)
• US Dollar Index: Dropped to 101.60 after failing to hold 102.00.

ECB Rate Cut Speculation Limits EUR Upside

Despite a weakening USD, the Euro’s gains remain limited due to expectations that the European Central Bank (ECB) could adopt an aggressive rate-cutting cycle.

With Eurozone inflation falling and economic growth slowing, market participants anticipate multiple rate cuts through 2025.

Recent Eurozone data, including a slight recovery in retail sales and a modest improvement in the Producer Price Index (PPI), has not shifted expectations of further ECB easing.

• Eurozone PPI: -2.1% (Expected: -2.5%)
• ECB Rate Cuts: BofA predicts a deposit rate of 2% by Q3 2025.

The chances of a #Fed rate cut of as much as 50bp rose to about 40%, with 104bp now prices for the year – And what about @ECB? – chart @Reuters https://t.co/2H3yAD6Etn pic.twitter.com/RPK6n4CfoH

— ACEMAXX ANALYTICS (@acemaxx) September 5, 2024

EUR/USD Price Forecast: Bullish Breakout Faces Key Resistance

The EUR/USD has broken above the $1.10786 level, marking a shift in momentum. Immediate resistance is seen at $1.11120, and if breached, further gains toward $1.11522 are likely. On the downside, support at $1.10261 must hold to maintain this bullish outlook.

• Resistance Levels: $1.11120, $1.11522
• Support Levels: $1.10261, $1.09932

In summary, while USD weakness could support further gains, the ECB’s easing outlook may cap significant upward momentum for EUR/USD.